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James Seyffart, a renowned Bloomberg ETF analyst, has shared insights into the potential approval process for crypto exchange-traded funds (ETFs), including the XRP ETF. He also focused on the ETFs for altcoins like Solana (SOL), Litecoin (LTC), and Hedera (HBAR). Seyffart highlighted the complexities and regulatory hurdles facing these applications, suggesting that decisions could stretch into late 2025.
Altcoin ETFs Approval Timeline
Seyffart explained that the approval of ETFs tied to Bitcoin and Ethereum was possible due to the presence of regulated futures markets for these cryptocurrencies. “Without a regulated market of significant size, the SEC has historically denied altcoin ETF applications,” he remarked. The lack of a comparable futures market for many altcoins, including SOL and XRP, is a significant obstacle for their ETF applications, he noted.
The analyst further indicated that changes within the U.S. Securities and Exchange Commission (SEC) could potentially influence the approval timeline. He stated that new leadership at the SEC, which may emerge in 2025, could bring a more crypto-friendly stance. However, he cautioned that “timeframes for obtaining approval are still unclear,” even under a leadership shift.
XRP ETF Applications Face Regulatory Barriers
Several firms, including WisdomTree and 21Shares, have recently submitted applications for XRP ETFs. Notably, WisdomTree filed a registration for a fund called “WisdomTree XRP Fund” in Delaware today and is preparing to submit its S-1 registration with the SEC.
🚨NEW: Global ETF provider @WisdomTreeFunds has registered in the state of Delaware for an $XRP ETF. I have confirmed with the company this is a legitimate filing.
Wisdom Tree has over $100 billion in assets under management. pic.twitter.com/BXutcLIW3x
— Eleanor Terrett (@EleanorTerrett) November 25, 2024
Seyffart emphasized that despite these efforts, the current regulatory scene does not support the launch of these XRP ETFs. Issues related to market manipulation, custody, and compliance remain unresolved.
Discussing potential advancements in ETF structures, Seyffart highlighted the role of staking for altcoins. He noted that staking for cryptocurrencies like Ethereum, SOL, and XRP could become a key feature in future ETF offerings.
“If a more crypto-friendly US SEC administration takes charge, we may see staking allowed in 2025,” Seyffart said in an interview.
Regulatory Filing Processes Delaying Approvals
Seyffart outlined the two primary filing routes for ETFs: the 19b-4 rule filings, which initiate a formal review period with fixed deadlines, and S-1 prospectuses, which lack defined timelines. Bitcoin and Ethereum ETFs advanced through the 19b-4 process, but most altcoin ETFs have yet to follow suit.
“Even if altcoin ETF filings begin the 19b-4 process today, decisions could take until late 2025,” Seyffart explained. He added that the pace of these approvals might depend on leadership changes at the SEC. A pro-crypto administration could potentially expedite the process, although the extent of such acceleration remains uncertain.
Index ETFs Could Mitigate Challenges
Seyffart also touched on multi-asset index ETFs that include altcoins. He cited Grayscale’s GDLC and Bitwise’s Crypto 10 Index, which have sought ETF conversion. According to him, such products might face fewer regulatory obstacles since their portfolios are heavily weighted toward Bitcoin and Ethereum.
He explained that the SEC may be more lenient with smaller altcoin allocations within index ETFs, provided the majority of the fund’s holdings are in compliant assets. However, approval will ultimately depend on whether the SEC considers the inclusion of altcoins acceptable under existing guidelines.
Seyffart expressed cautious optimism about the future of altcoin ETFs. While decisions for SOL, LTC, HBAR, and XRP ETFs could start in 2025, he noted that the pace will hinge on leadership changes and shifts in the regulatory approach.